Following ABA Petition, Regulators Move to Codify Statement on Guidance

In response to a 2018 petition from the American Bankers Association and the Bank Policy Institute, the federal banking agencies today proposed to codify their joint statement clarifying that regulatory guidance does not have the force and effect of law. Under the proposal, the agencies’ statement would be considered binding on the FDIC, OCC, Federal Reserve, Consumer Financial Protection Bureau and National Credit Union Administration.

“The agencies note that, in some situations, examiners may reference (including in writing) supervisory guidance to provide examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations,” the proposal said. “The agencies also reiterate that they will not issue an enforcement action on the basis of a ‘violation’ of or ‘non-compliance’ with supervisory guidance.”

The agencies also agreed with ABA and BPI that supervisory criticisms should be specific and that matters requiring attention, memoranda of understanding and any other formal mandates or sanctions “should be based only on a violation of a statute, regulations, or order, including a ‘demonstrably unsafe or unsound practice.’” However, the agencies did not include revisions to their individual supervisory practices related to supervisory criticism in their proposal.

“We commend the agencies for issuing a proposed rulemaking that would codify the role of supervisory guidance,” said ABA President and CEO Rob Nichols. “We look forward to continuing to work with them to improve the examination process so it is fair and consistent.” Comments will be due 60 days after publication in the Federal Register.